The story of the Cobra Effect is probably apocryphal, but it goes something like this: during the British Raj (1858–1947), the British Imperial administration in Delhi had a cobra problem — as in too many. They bite and so forth. Some clever official came up with the idea to incentivise the local population by paying good money for each dead cobra delivered to the relevant administrative office. Rapidly people cottoned on to the economic incentives involved and they began to breed the cobras for the express purposes of receiving the cash payouts. When the Brits realised their miscalculation, they ended the programme. And they were left with far more free-roaming cobras infesting the streets of Delhi than they’d bargained for — a much greater population than they’d started with.
The economic term for this sort of unforeseen outcome is “the perverse incentive”. I’m sure you’ve witnessed this effect in action all over the place. There are actual historical records involving similar exercises in incentivisation. The Great Hanoi Rat Massacre in 1902, a failed French colonial initiative, managed to decimate the tails of countless rats. Unfortunately, just not the rats themselves. The perverse incentive required that rat killers bring the tails of their catch in to the local authorities for accounting purposes. Soon a population of docked rats proliferated. The mutated rodents were set free, post the loss of their tails, and encouraged to breed furiously and efficiently. One breeding pair of tailless rats can produce 1,250 more opportunities for rat tails to submit to the authorities per year. You do the maths.
It’s the unforeseen scale of the human enterprising spirit that always astonishes me. Take the inventive scheme attached for opening new bank accounts on the daily recently offered by the American bank Wells Fargo. They offered a bonus of up to $325 for opening a new checking account. The net result was that millions of fraudulent accounts were opened and the bank almost crashed. Or consider the “worker bees” at an Italian factory, who’d receive a heat-related bonus when temperatures inside the factory hit certain levels. To ensure the intended result, the workers courted heatstroke with alacrity by scuppering all ventilation and air conditioning.
You don’t need to look far to discover wonderfully inventive case studies. From police statistics to tenderpreneurial efforts, the ability to deploy the perverse incentive for extreme and unintended personal gain is masterful.
It’s all very predictable. Humans operate on a limited trajectory. We’re masters at giving more attention to our extrinsic drives that come in piles of hard cash than to higher order ideas — like ethics or similar intangible goods.
I saw that Ted Turner died last week. He was the founder of the American multinational news media company, CNN. It was great while it lasted, but the company endured a fabulous Cobra Effect case-study example if ever I saw one. The focus that seriously shifted the needle on their flagging numbers was the virtually non-stop, outraged coverage of the antics of the wildcard presidential contender of the day — one Donald J Trump, before he was president for the first time in 2016. The news channel was ostensibly covering Trump’s early campaign in order to expose his ludicrous lies, controversies and outrageous statements — and, ultimately, to try to prevent his election to president of the United States. But the perverse incentive was built in from the start.
Trump’s ridiculous style drove massive audience engagement, web traffic and advertising revenue. The result was that the more they covered stories about him, the more they became financially incentivised to grant billions of dollars to him in free airtime, which, as we now know, ended up ensuring that he got elected.
The constant media coverage vastly amplified his message, bypassed traditional campaign spending requirements and directly fuelled his political rise to the highest office in the land. John Miller, who ran another American news agency, NBC, had produced Trump’s Apprentice show, so he knew how to work this cobra to its full effect. It’s the outrage economy for which we’re still paying the price.
This stuff is called cognitive tunnelling. When the measure becomes the target and when metric obsession takes all precedence, chances are it long ago stopped being a good way to measure the outcomes.
You may find yourself in an incredibly oppressive back office in Hanoi or Delhi counting dead snakes or rat tails and wondering why, instead of a marvellously tabulated numerate list of success and administrative glory, you’ve unleashed a toxic, wildly poisonous Hydra instead, which grows two heads in place of every one you cut off.
